Tuesday, May 25, 2010

iMedia Connection: Where the agency fits in marketing's next phase

Article Highlights:

* Clients want their agencies to provide them with creativity
* Unless direct staff, agency and consultant fees, and media are all constantly optimized, value will inevitably be lost
* One area agencies must be able to shine, beyond their fundamental creative mandate, is in the area of production

As a leader of a major New York agency, it might be considered sacrilege for me to focus on the thorny question of the agency's evolving role and its value in the marketing resource optimization mix. Yet, I have never been a big fan of ostriches, and this hardly seems like the time for any of us to stick our heads in the sand and blindly hope for a sunnier day. The crucial question facing so many companies these days is not going to go away, so perhaps it's time we discussed it openly: "What should we be actually paying the agencies to do?"

Make no mistake, this is not the persistent, "How can we pay the agency less to do more?" subject that our friends in procurement have so ably addressed. The real, bigger issue at hand calls into the question the actual role of the agency itself. It seems appropriate that, given the immense changes that the powerful cocktail of "everything is digital" and the recession have brought to the marketing industry, it is time to reconsider the roles of both the agency and the client. In short, who should be doing what and what is the best path to maximizing value?

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2.5 to 3.5 times the cost...
When you consider that in order to meet ever-fleeting profit objectives, the typical agency must charge somewhere between 2.5 and 3.5 times more for the cost of any given resource than it would cost for the client to employ that same resource, it is clear that agencies have no choice but to constantly prove their value or inevitably shrink (or perish). This challenge is further exacerbated in a still struggling, recession-influenced market -- there is an oversupply of agencies, and the basic laws of supply and demand have forced most agencies to fundamentally readdress their basic value propositions.

Every CMO's job description includes one common requirement that sets the role across all industries, all geographies, and all marketing departments -- namely, resource optimization. The CMO has three macro levers of cost to manage: direct staff, agency and consultant fees, and media. Unless all three are constantly optimized, value will inevitably be lost. The explosion of digital -- and the potential value of its resulting mountains of data -- is merely the latest manifestation of what marketers must address to maximize ROI. What I am suggesting here is that it is now time to place agency ROI into the center of the discussion.

What do clients want?
After dedicating more than 25 years to the marketing profession, for both brands and agencies across three continents, only one theme has remained consistent throughout: Clients and corporations want their agencies to provide them with "creativity." Of course, the varied definitions of creativity are difficult to quantify, and therein lies one of the biggest challenges.

The predominant premise here is that somehow companies are not capable of being creative on their own. The theory goes something like this: Creative people would not work well in a corporate environment, and brands need a constant refresh of creative ideas and talent. Furthermore the employee attrition associated with such a persistent need for "new ideas" (and talent) is antithetical to traditional corporate retention efforts, not to mention the added need to manage labor costs and liability.

Further adding to the complexity of this digital world of ours is the fact that "creative" has broadened immensely in both definition and its supporting core disciplines.

Today the top creative minds are just as likely to be born from technology backgrounds and schools of architecture and industrial design as they are from art school and English literature courses. Perhaps this eclectic background mix speaks to why it is has been improbable, if not impossible, for the traditional corporation to successfully source and retain these types of talent and why my entire management team and I spend upwards of 25 percent of our time focusing on talent selection.

To be an enduring, successful creative agency today, arguably you must start every project with a true understanding of insights that are tied to both the brand and the customer (or distinct segments of customers), and this requires special minds capable of both ethnographic and brand research. In a world where ROI is on the tip of all our tongues, most agencies must also assume responsibility for the measurable value of its product, which has given rise to the never-ending talent hunt for measurement and analytics professionals -- especially those who can explain complicated concepts in plain English to a predominantly less prepared, less statistically savvy audience.

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